Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part VIII]

Sale of Custom Bonded warehoused goods and High Sea Sales [Sec 7(2)(a) read with Schedule III) and Section 17(3)

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. What is the treatment of the following activities?

• Supply of warehoused goods to any person before clearance for home consumption [Para 8(a) of Sch III)]
• High Sea Sales [Para 8(b) of Sch III)]

Law Brothers’ View:

First: These are not treated as supply as per section 7(2)(a) r/w Schedule III of CGST Act.

Second: These are not required to be declared in GSTR 1 and GSTR 3B but these are declared in Table 5F of GSTR 9 under the table having the description ‘Non GST Supply (includes no supply)’.

Third: Para 8(a) is included in the value of exempt supply by virtue of amendment brought in vide Finance Bill, 2023 and consequently it becomes a reason of higher reversal of common credit.

FAQ 2.  What is the intent of the amendment brought in respect of schedule III?

Law Brothers’ View: Para 7 and Para 8(a) and 8(b) were inserted vide Finance Act, 2018 but not with retrospective effect. Now lawmakers have come up to remove this anomaly by stating that these shall be deemed to be made effective from 01 July 2017.

FAQ 3. What is not fair with this amendment?

Law Brothers’ View: This amendment is a half-hearted step because it is stated in the Finance Bill, 2023 that no refund shall be made of all the tax which has been collected, but which would not have been so collected, had subsection (1) been in force at all material times.

In our view, the validity of this amendment may be tested in Court as per article 265, article 14 and article 19 of The Constitution of India.

Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part VII]

Interest on delayed Refunds [Section 56]

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. What is the background of proposed amendment in section 56?

Law Brothers’ View: There is an explicit provision of granting the 6% interest in case of delay in giving the refund to the applicant of refund. Still, the department has not taken steps in many cases in the application of the provision.

Further in cases where the deficiency memo is issued by the department in RFD-03, the computation of the time limit has been debated as to whether it is to be started fromthe date of filing of the application or the date of the resolution of deficiency. It appears that the amendment is brought to consider this situation.

FAQ 2. What is the new in the amended provision?

Law Brothers’ View:

What is not changed?

• Event of triggering the interest liability on account of exchequer: Delay in refund (i.e. giving the refund after 60 days from the date of application)
• Computation of days for the interest: We do not notice any change in this i.e. Refund shall be computed for the delay period (to be reckoned from 61^st day till the date of the refund)

What is the change?

• In our view, the proposed amendment contemplates to provide the manner of computation (What can be the way of computation of interest other than I= P×T×R, where every variable is clear)!!, conditions and restriction in respect of such interest payable.
• For operationalize this provision, the rules will be issued by the government.

Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part VI]

Refund of Tax – Provisional basis [Section 54(6)]

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. What is the background of proposed amendment in section 54(6)?

Law Brothers’ View: In the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, law provides the refund on a provisional basis, 90% of the total amount so claimed, excluding the amount of input tax credit provisionally accepted.

It is noticeable that the concept of provisional ITC is done away w.e.f. 01 Oct 2022 vide Finance Act, 2022.

With this the reading has been redundant and thereby it is proposed to omit the wordings ‘excluding the amount of input tax credit provisionally accepted’.

FAQ 2. What is the practical implication of the amendment?

Law Brothers’ View: It is just to align the context and to make a feasible reading of connected provisions.

FAQ 3. What is the practical implication of the amendment?

Law Brothers’ View: It is just to align the context and to make a feasible reading of connected provisions. It is also worth to note that in majority of the cases, 100% amount is being refunded in one go by the department for their administration convenience.

Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part V]: GSTR 1, GSTR 3B, GSTR 8, GSTR 9 & 9C:

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. What is the background of proposed amendment in section 37, 39, 44 and 54?

Law Brothers’ View: At present, the law provides a time limit to furnish the form GSTR 1, GSTR 3B, GSTR 8, GSTR 9 & 9C.

But law has not provided the time bar within which the same can be furnished. Now the proposed amendments provide that it shall not be allowed to furnish the form GSTR 1, GSTR 3B, GSTR 8, GSTR 9 & 9C after the expiry of a period of 3 years from the due date of furnishing the said form.

E.g. Where the due date of GSTR 9 and GSTR 9C of FY 2022-23 is 31 Dec 2023 (assuming it is not extended),with this proposal, it can be construed that it will not allow to furnish GSTR 9 and GSTR 9C post 31 Dec 2026.

FAQ 2. Amendments seek to tighten the screw in line with other provisions, isn’t it?

Law Brothers’ View: Law has already provided the various provisions intending to adhere with the time lines, such as

• Late fee,
• Notice u/s 46,
• Assessment of non-filer of returns,
• Penalty provisions
• Cancellation of registration,
• Disabling the generation of e-way bill and
• Disabling the subsequent filing of the forms etc.

Now one more feather, sorry, one more restriction is imposed here !!

FAQ 3. What types of practical problems can be foreseen from this amendment?

Law Brothers’ View: In appeal cases of revocation of cancellation of registration after the expiry of the 3 years from the due date, this provision may be a bar.  Let’s see, how the law plays with such a situation.

FAQ 4. Is there any ray of hope of relaxation in this?

Law Brothers’ View: Amendments provide that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow a registered person or a class of registered persons to furnish the Form GSTR 1, GSTR 3B, GSTR 8, GSTR 9 & 9C, even after the expiry of the said period of three years from the due date of furnishing such form.

Once the provisions are made effective, government may come up with the notification to cater to the situations of practical difficulties.

Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part IV]

Applicability and Non-Applicability of Registration Provision

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. What is the background of proposed amendment in section 23?

Law Brothers’ View: At present, the law provides section 22 and section 24 of Applicability of Registration and section 23 for situation of Non Applicability of Registration.

Just to glimpse, the background of there provisions are given below:

Consider a situation

Where any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under GST is not liable for registration [Sec 23(1)(a)] and

On another hand, if such person receives the supplies notified under RCM becomes liable for registration [Section 24(iii)].

This type of oxymoron is actually defeating the intended purpose of relaxation to the person engaged in wholly exempt supply.

To cater this peculiar issue, proposed law states thateven though a person is liable u/s 22(1) or section 24 (various situation including liability of registration based on RCM), a person will not be required to registration if person is engaged in wholly exempt supply and other cases of section 23.

FAQ 2. An agriculturist is engaged in the supply of produce cultivated from land will be liable for registration where he obtains the GTA Services.

Law Brothers’ View: GTA services are already exempted where transportation services are provided by GTA w.r.t. the produce out of cultivation. So, it was already out of the RCM being exempted supply. Herein such cases, there was not an issue of thinking of the application of section 24.

But where the situation is covered u/s 23 and 24 both then application of the proposal comes into effect.

Welcome move!!

FAQ 3. An Advocate supplies legal services to a person (other than a business entity) through ECO (say, www.lawbrothers.com) and the aggregate turnover of such advocate exceeds the threshold limit during the F.Y. Both the supplier and recipient are located in same state.

1. Whether the advocate is liable to registration?
2. Whether the business entity is liable to registration?

Law Brothers’ View:

1. Such supplies are exempted vide Notification No. 12/2017- CT(R). Section 23 overrides the section 22(1) therefore such an advocate is not required to be registered.
2. Such a person is also not liable to pay RCM (being other than the business entity)as perNotification No. 12/2017- CT(R). So, there is no question of applicability of section 24 for the recipient here.

FAQ 4. An Advocate supplies legal services to a person (a business entity having turnover exceeding the threshold limit, Running the business of agriculture produce out of cultivation of land) through ECO (say, www.lawbrothers.com) and the aggregate turnover of such advocate exceeds the threshold limit during the F.Y. Both the supplier and recipient are located in same state.

1. Whether the advocate is liable to registration?
2. Whether the business entity is liable to registration?

Law Brothers’ View:

1. Such supplies are exempted vide Notification No. 12/2017- CT(R). Section 23 overrides the section 22(1) therefore such an advocate is not required to be registered.
2. This transaction falls under RCM as perNotification No. 13/2017- CT(R)]. So, even though there is an applicability of section 24 still such a person is also not liable to registration as section 23 (wholly exempted) overrides the section 24 (RCM).

Budget Proposals -2023 Series: Asking Questions and Finding Answers [Part III]

ITC: Blocked Credit: Dealt with the discussion of amendment in Schedule III changes.

This blog is one of a series of topic-specific FAQs concerning Budget 2023 proposals. It addresses the practical issues raised due to proposed changes.

Vivek Laddha, Manish Gupta, Pooja Patwari

FAQ 1. Is there any new entry in section 17(5) i.e. blocked credit?

Law Brothers’ View: Yes, ITC shall not be available in respect of goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.

Kindly note that section 135 of Co. Act, 2013 provides that every company having

• net worth of rupees 500 crore or more, or
• turnover of rupees 1000 crore or more or
• a net profit of rupees 5 crore or more

during the immediately preceding financial year shall spend, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years.

It infers that in the case where the company spends the amount by procuring the goods or services or both for activities relating to CSR, the ITC on such expenditure is proposed to be blocked.

FAQ 2. What if such expenditure is not incurred in pursuance of the requirement of section 135 of Co. Act?

Law Brothers’ View: Strict interpretation suggests that ITC shall not be blocked in case voluntary spending in name of CSR.

FAQ 3. What is the position on the date for input tax on CSR expenditure?

Law Brothers’ View: This is very clear that it is a prospective amendment. Presently, this blocking is not in the scenario and therefore ITC can not be denied till the proposed provision is made effective.

This provision will increase the cost to the companies. Now, neither the CSR expenditure is allowed as expenditure in Income Tax nor its ITC is proposed to be allowed.